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Grabbing or Compensating? Evidence From Private Investment in Public Equity in China

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  • Yanjian Zhu
  • Jiajing Xu
  • Fan Yu

Abstract

We explore the mechanisms of interest grabbing and compensation in private investment in public equity (PIPE) events. The participation of affiliated and strategic investors commands significant issuance discounts for various reasons. Affiliated investors often sell their stakes after the lockup period and manipulate corporate dividend policies for personal gains. Their participation is associated with increased receivables and related‐party transactions, leading to overleveraging and inefficient investments. However, strong governance can mitigate these adverse effects. Conversely, strategic investors, as long‐term shareholders, enhance corporate governance and firm value. Therefore, issuance discounts reflect affiliated investors' grabbing behaviour and compensation mechanisms for strategic investors.

Suggested Citation

  • Yanjian Zhu & Jiajing Xu & Fan Yu, 2025. "Grabbing or Compensating? Evidence From Private Investment in Public Equity in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(3), pages 2842-2865, September.
    • Handle: RePEc:bla:acctfi:v:65:y:2025:i:3:p:2842-2865
    DOI: 10.1111/acfi.70021
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